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Tuesday, September 19, 2017

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Sansolo Speaks: The Road to Irrelevance

by Michael Sansolo

There was a sporting event last month that offered an object lesson on just how much the world can change in a very short time, which in turn reminds us all of the need to keep looking ahead.

The event was an unusual boxing match. It paired Floyd Mayweather, one of boxing’s most celebrated participants, and Conor MacGregor, apparently a big name in the Ultimate Fighting Championship.

At MNB, as you have no doubt noticed, we believe there are lessons in nearly everything. Well, if you simply Google lessons about this fight, you’ll be overwhelmed. The match up of two athletes from arguably different sports was a cause for lessons in risk taking, financial management and more.

I’d like to argue there’s a different lesson though; the speed at which irrelevance arrives. And while this column is about the changes in two sports, it serves a warning to what could happen so quickly with shopping tendencies. That, in turn, reminds us why we must always be looking ahead and finding a way to adjust to a changing society.

So let’s consider those sports.

There was a time not very long ago when boxing was a big deal. Even casual fans knew people like Sugar Ray Leonard. And heavyweight champions from Muhammad Ali to Mike Tyson were among the most famous people on earth.

Today almost none of us (I’m betting) know who holds that very same heavyweight title. I Googled that question and didn’t recognize any of the four people currently claiming the throne. Boxing and offshoots like mixed martial arts and ultimate fighting still have avid followers, but the sport is largely invisible to the general population.

If the powers that be within the boxing world saw this coming, they did nothing about it. If they didn’t see it coming, they probably weren’t paying attention.

It may be happening again. Although no sport today commands more attention than professional football, there are signs of long-term concern and it has nothing to do with who doesn’t stand during the national anthem or whether Tom Brady and the New England Patriots really cheat.

It’s all about parents and their unwillingness to let their young sons even try the game thanks to the growing fears of head injuries.

A friend of mine who works in the National Football League (NFL) says those youngsters are a constant subject of conversation inside the league. Statistics show youth participation in football peaked in 2009 and has headed steadily downhill since.

As my friend explains, the drop off in youth football is starting to show up at the high school level. Because football requires such large teams, the impact will no doubt move on to the college and then pro levels. Then, well, who knows?

The NFL apparently understands. Rules keep changing to prevent or minimize head injuries; equipment is constantly upgraded; and rubber pellets are now placed on the field to cushion falls. But until parents believe the game won’t threaten the lives and longevity of their kids, the problem remains.

That means 10 or 15 years from now, football’s grip on America’s sports culture could fade fast and badly just as boxing’s did.

To me that’s the lesson from all of this. We need constantly look forward and consider the world of tomorrow’s shoppers, who are far more diverse and tech savvy than anyone today, and try to determine the changes they want before they do.

Otherwise, the road to irrelevance could be way faster than anyone wants to believe.

Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.

Toys R Us Files For Bankruptcy Protection

Troubled toy store chain Toys R Us filed for Chapter 11 bankruptcy protection late last night, saying it needs the flexibility to revamp more than $5 billion in debt, including a $400 million debt payment due next year.

The New York Times writes that while Toys R Us has had its problems competing with big box stores such as Walmart and e-commerce players such as Amazon, the heavy debt load “has weighed on the company for years. The private equity firms Kohlberg Kravis Roberts and Bain Capital, as well as the real estate firm Vornado Realty Trust, purchased the company in a leveraged buyout for about $6 billion in 2005.”

Company management said that bankruptcy would allow it to focus on the long term and “fuel its aspirations to bring play to kids everywhere and be a best friend to parents.”

The Times writes that “JPMorgan Chase and a group of other lenders have agreed to provide the company $3 billion in financing,” allowing Toys R Us to continue to pay employees and suppliers. However, there have been reports that at least some suppliers have started requiring shipments to be paid for on delivery.

KC's View: This isn’t much of a surprise, but not because rumors about an impending bankruptcy protection have been floating around for weeks. The fact is that more retailers have filed for bankruptcy protection already this year than did all of last year, and there probably will be more.

I know that it bothers some folks when I decry the Toys R Us experience (some of those emails are in “Your Views,” below). But I have to say that I always found a visit to its stores to be a chore and was more about assaulting my spirit than lifting it up. Toys R Us was never my “best friend,” and I think they probably need a lot more than bankruptcy protection to convince me that there is a path forward to long-term viability.

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Tuesday Morning Eye-Opener: Drink It In

by Kevin Coupe

Just asa change of pace this morning, I want to refer you to a very funny piece in The New Yorker, a satiric turn entitled “Starbucks Drinks For A New America.” It suggests the kinds of beverage innovations that Starbucks may come up with in order to be relevant and resonant to today’s customers.

It includes something called Nuclear-Annihilation Almond Latte, which is described as “an oddly pleasant fusion of espresso, almond milk, and the inner peace of resigning yourself to inevitable doom. Topped with a marzipan mushroom cloud!”

It’s very funny, and can be read here. It’s an Eye-Opener.

IGA Gets New President/CEO

The Independent Grocers Alliance (IGA) announced that John Ross, current President of Inmar Promotion Network, has been named the organization’s president/CEO succeeding current IGA Chairman, President and CEO Mark Batenic.

Ross will begin his tenure as CEO mid-October of 2017, while Batenic will remain Chairman of the Board until his retirement on December 31, 2018, transitioning in January of 2019 to Non-Executive Chairman.

In a note to members yesterday, Batenic wrote:

“John sees the dramatic and complex evolution of retail as an opportunity rather than a problem, and he has the knowledge and skills to bring that opportunity to life for IGA retailers.

“With more than 30 years of retail, data science and marketing experience, he has spearheaded the use of technology and data to improve the delivery of information, goods and services that make a difference in the lives of shoppers and those who serve them across the globe. In the process he has revolutionized countless brands—and even shopping as we know it—by marketing to shoppers in a way that makes them feel special, unique and heard.

“Making shoppers feel special, unique and heard. It's what IGA retailers do best, and now under John's leadership, they'll have the guidance and resources to continue doing it in ever-more modern and relevant ways.”

Batenic joined IGA to run its US operations in 2006 after a career with now-defunct wholesaler Fleming, and as executive vice president/CEO of Clemens Market, which also doesn’t exist as an independent entity anymore. In 2010, he succeeded Dr. Tom Haggai to run the company’s global operations.

KC's View: Many IGA members are among the most vulnerable to the competitive challenges created by bigger and, let’s face it, more innovative companies, and so it is interesting that IGA has decided to bring someone in from the outside who has a background in data and marketing.

They’ve certainly got a lot of work to do in these areas, but IGA also has to find way to cut from its roster of stores the locations that simply do not meet certain standards for the modern supermarket.

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Study: Same-Day Delivery On The Rise

Retail management consulting firm BRP is out with a new study saying that retailers are responding to consumers’ demand for quick delivery, with “51% of retailers indicate they offer same day delivery, up from 16% last year, and within two years 65% plan to offer this service. Delivery via a third party service, such as Uber or Lyft has also increased (from 20% last year to 32% this year) as retailers look at different ways to offer customers the flexibility to shop, purchase and receive their goods on their own terms.”

“With Amazon offering same day delivery in some markets, the push is on for retailers to get items delivered to customers as soon as possible,” said Jeffrey Neville, vice president at BRP. “Autonomous delivery and distribution are the next step with self-driving vehicles soon a reality and a few food delivery start-ups already testing the concept.”

KC's View: I’ve been saying for years that free and/or fast delivery was something that retailers, if they wanted to be competitive, were going to have to figure out how to factor into their business plans. It is what customers want, it is what some retailers are programmed to provide, and so it was inevitably going to be something that was going to expand.

Best Buy Rebound Proves To Be Durable

The New York Times has a story about how its reporter went into a Best Buy recently and found the following:

“Happy-looking people were huddled around tables filled with the latest gadgets from Microsoft and Apple. The video game aisle was bustling. Blue-shirted employees were helping a customer pick from a glowing wall of flat-screen TVs. There was a line — a line! — at the checkout counter.

“Many people, myself included, assumed that the entire big-box retail sector would eventually fall under Amazon’s steamroller. I knew Best Buy had spent the past several years playing defense against Amazon, finding some initial success by cutting costs and reducing prices to match its online rivals.

“But Best Buy’s rebound has been surprisingly durable. Revenue figures have beaten Wall Street’s expectations in six of the last seven quarters. The company’s stock price has risen more than 50 percent in the past year. Workers are happy. And judging from several other visits I paid to Best Buy stores, the chain appears to have avoided the bleak fate of other big-box retailers.”

Best Buy CEO Hubert Joly says that the keys to its success have been 1) its decision to price-match competitors, including Amazon, “to combat showrooming” and keep people inside its four walls, 2) a focus on customer service through an emphasis on people, with the development of in-home and in-office advisory and repair services, 3) quiet cost cutting that was effective without showboating about it, and 4) turning stores into mini-warehouses, allowing them to ship to its online customers and therefore being more efficient and effective.

The Times writes that “Joly knows that despite Best Buy’s recent momentum, it’s not out of the woods yet. To succeed over the long term, it will need to do more than cut costs and match prices. Walmart, another big-box behemoth, is investing billions of dollars in a digital expansion with the acquisition of e-commerce companies like Jet and Bonobos, and could prove to be a fierce rival. Amazon has been expanding into brick-and-mortar retail with its acquisition of Whole Foods, and is moving into Best Buy’s home installation and services market.”

Joly, the story says, remains focused on the battles ahead: “Once you’ve had a near-death experience, arrogance, if you had it in your bones, has disappeared forever.”

KC's View: Interesting story. I’d suggest that every retailer, even if has not had that near-death experience, should act as it if has … and compete accordingly.

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Chipotle Blasted On Social Media Over Queso

Reuters reports that Chipotle customers on social media have “turned up their noses at the burrito seller’s new ‘queso’ cheese topping,” saying things like it “is probably the most disappointing thing I've ever experienced in my life,” and it “is not good…and I love cheese.”

Chipotle put queso on the menu last week, describing it as “complex and slightly spicy.”

The Reuters story notes that “previously tested in Colorado and Southern California, queso is served as a topping on burritos or as a side dish with chips. It is the company’s latest attempt to attract new customers as well as regulars who fled in recent years following a string of food-borne illness outbreaks.”

KC's View: So I guess it isn’t enough just to not make people sick. Chipotle’s customers actually want the food to taste good. Go figure.

I would like to gently suggest to the Chipotle customer who described the queso as “probably the most disappointing thing I've ever experienced in my life” that you should be very happy with your life, since you’ve obviously been blessed. You’re a very lucky person when lousy cheese is the worst thing in your life.

Just want to provide a little context.

Worth Reading: The Trader Joe’s Advantage

There is a wonderful piece in Fast Company by Hayley Benham-Archdeacon in which she writes about her seven years working in six different Trader Joe’s stores, concluding that “they have the best managers possible, consistently.”

An excerpt:

“Trader Joe’s hierarchy is organized unlike anywhere else I’ve worked. Each store runs with one captain, and a team of eight to 12 mates. Everyone else is crew. And yes, they are thorough with the sailor-ship deck theme.

“I thought that having so many middle managers would cause problems, but in fact it turns out to be good for everyone. Oversight of opening and closing shifts are distributed evenly, and tasks and assignments are rotated throughout the week, which means no one is stuck taking in the frozen truck at 4 a.m. every single morning, or closing out our computers every night until midnight. Maybe that’s why managers are able to stay so nice to us. And if you don’t feel comfortable going to one manager about a problem or personal event? No problem, you have 10 others to speak to.”

And another:

“Throughout my time working at Trader Joe’s, I had 11 other jobs and internships. But it wasn’t until I worked in other environments - fast-paced, prestigious offices where I wrote for newspapers, interned for politicians - that I suspected I was working for somebody less qualified than myself. It never helped when my under-passionate manager was less perceptive, less flexible, and less respectful about my input. I’ve worked far too many places where the managers talked to women like they were puppies, or spent most of their time peacocking rather than managing, or treated me like a time-suck rather than a contributing part of a team.”

The conclusion: “Workplaces often like to put you in a room together and tell you you’re a family now, but it was intensely true at Trader Joe’s.”

You can read the entire piece here.

The MNB Walmart Watch

CNBC reports that Walmart has removed “a hurdle that had long prevented food stamp recipients from using its online grocery shopping platform” at at select locations “will allow shoppers using EBT to order items through Wal-Mart's online grocery pickup platform, then pay in-person when they pick up their groceries.”

The story says that “the U.S. Department of Agriculture, which oversees the Supplemental Nutrition Assistance Program, requires that customers using electronic benefits transfer, pay for their purchases at the "actual time and place" of a sale … This particular program evolved in response to the USDA selecting seven retailers in January to test online ordering and payment by SNAP participants. Amazon was also on the list, but Wal-Mart was not.”

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...with brief, occasional, italicized and sometimes gratuitous commentary…

• The Seattle Times reports that Portland-based New Seasons has signed a deal to open a new store in Seattle, late next year.

The store will be in the Central District, and will be its third in the market; its first is operating on Mercer Island, and a second is expected to open in Ballard next year.

The Times notes that the announcement has not been met with universal enthusiasm because some see it as reflecting a gentrification that is not always welcome. The Times writes that “the Central District was majority African American in the 1960s, but today, due to gentrification, is roughly 60 percent white. Many protests against gentrification have erupted in the district in the past few years … Some residents of the Central District already are preparing to mourn the closing of a locally owned Red Apple, a nearby grocer on a block that was bought by Paul Allen’s Vulcan Real Estate and will be bulldozed this year to build a mixed-use project with 570 apartments. The announced closing inspired an oral history project of people’s stories about the store, which the project’s organizers call ‘a community center masquerading as a grocery store’.”

Progress isn’t always easy or pretty. While I’m not sure this is the case here, it often is the case that when stores are closed, people who haven’t shopped there very much suddenly find reasons to be sentimental about them. It always has been my experience with New Seasons that it is an improvement over most other stores, and that it does it best to forge and maintain connections to the communities it serves. It sounds to me like the Central District may be a perfect place for a New Seasons, and if the folks there give it a chance, they may find that New Seasons is a perfect store for them.


MarketWatch reports on new Kantar Worldpanel numbers showing that during the last quarter in the UK, Aldi’s market share has grown from 6.2 percent to 6.9 percent, while Lidl’s has grown from 4.6 percent to 5.,3 percent.

During the same period, the story says, Tesco’s market share went from 28.1 percent to 27.8 percent, Sainsbury’s went from 15.9 to 15.7 percent, Walmart-owned Asda’s share went from 15.7 percent to 15.4 percent, William Morrison’s went from 10.4 percent to 10.3 percent, and Waitrose’s market share remained unchanged at 5.3 percent.


Bloomberg reports that “Walgreens Boots Alliance Inc. is poised to revise its agreement to buy individual Rite Aid Corp. stores, a move that may be enough to resolve outstanding antitrust concerns and clinch U.S. approval for a deal the companies have been pursuing in different forms for two years, said people familiar with the matter. Walgreens is in the final stage of negotiations with the Federal Trade Commission about its plan to buy more than 2,000 Rite Aid stores and is set to propose a modified deal that could be announced as soon as Monday.”

Executive Suite

• Dollar Tree announced that it has named a new CEO, Gary Philbin, who the Wall Street Journal describes as having “been with the company in various roles since 2001. He most recently served as enterprise president, with responsibilities for both Dollar Tree and Family Dollar Stores Inc., which was acquired in 2015.”

Philbin succeeds Bob Sasser, the company’s CEO since 2004, who now becomes executive chairman of the board.

Your Views: Taking Exception

Got a number of emails responding to my dismissiveness of the Toys R Us experience, written in anticipation of the bankruptcy filing that actually took place last night.

MNB reader Gene Ford wrote:

This weekend, I walked the Toys R Us aisles with my grandson looking for new toy to celebrate a special accomplishment.  You can’t get that feeling and special time together from sitting in front of a computer looking at toys on Amazon.  Nothing can replace that instant happiness and satisfaction.

And MNB reader Rachel Steele wrote:

As a parent of young kids, I would be very sad to see Toys R Us go.  Are there stores in poor conditIon?  Yes.  Are they overpriced vs Target, Walmart and Amazon?  Yes.  But where else can you go to see such a large selection of toys, in-person?  One of my favorite yearly rituals is to spend a couple of hours in Toys R Us with my husband Christmas shopping for our kids.  Cleaner stores and eliminating the standard 20% mark-up would go a long way.




Responding to the story about how US food companies are exporting fatty, unhealthy foods to the rest of the world, one MNB reader wrote:

When I travel internationally I see a lot of “American” fast food chains and I ask myself, “Is this the best we can offer the rest of the world?”




Also got several emails responding to my commentary about what Amazon ought to look for in a new home. I wrote:

I know it is unlikely, but I actually think it would be a great message if Jeff Bezos were to make a public statement that the choice of a location will not depend on tax breaks and incentives, but rather on the degree to which localities invest in public services, especially public education. I’d like it if Bezos would say that he wants to know that the school districts serving the HQ2 location believe that there is nothing more important than having elementary, middle and high schools that put academics first (certainly ahead of putting lights in the high school football field), that emphasize math and science, that are inclusive of minorities of all kinds, that don’t engage in the kinds of stereotypes that slot boys into certain categories and girls into others, that hire and invest in administrators and teachers who understand that it is critical to teach the child, not just the subject and to the test.

Tax breaks and incentives will be important, and at least the initial reports suggest that Amazon is not focused on opening its HQ2 in an area that requires remaking and rehabilitation. But Amazon will do best if it has an educated workforce and consumer base, and I think this would be a terrific place and time to drive this fact home.


One MNB reader wrote:

Great synopsis and thoughts on Amazon's HQ2 this morning!

 I think it's safe to say that, when the winner is announced, there will be quite the land rush--it will be interesting to see how many folks, vying for opportunity, move to that lucky city after it's decided!


And MNB reader Brian Carpentier wrote:

On the HQ2 Amazon article sites, I must say, your response Kevin is a home run!

From The MNB Sports Desk

In Monday Night Football action, the Detroit Lions defeated the New York Giants 24-10.

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